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arctic
Junior Train Controller
Joined: Apr 26, 2006
Last Visited: Nov 21, 2008
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Posted: Mon May 19, 2008 10:33 am
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From the Sydney Morning Herald.
Rising interest rates might have been too much for them?
| Quote: | Rail link up for sale: report
May 19, 2008 - 5:42AM
Bank lenders have forced the sale of the $1.2 billion Adelaide to Darwin rail link.
The line has been put up for sale by owner FreightLink, on orders from lenders following years of mounting debt and underperformance, The Australian Financial Review reported on Monday.
The banks, led by the ANZ, have not been swayed in their decision despite a recent turnaround in performance due to a surge in mining cargo volumes out of South Australia and Darwin's increasing popularity as a port.
The link could prove attractive to several buyers, including Asciano Group, Queensland Rail and Babcock & Brown Infrastructure, which have significant rail interests. |
http://news.smh.com.au/national/rail-link-up-for-sale-report-20080519-2fqk.html
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arctic
Junior Train Controller
Joined: Apr 26, 2006
Last Visited: Nov 21, 2008
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Posted: Mon May 19, 2008 12:17 pm
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Now confirmed by Freightlink itself:
http://www.freightlink.com.au/aspx/news_article.aspx?id=128
| Quote: | FreightLink Announces Sale
19 May 2008
FreightLink, the owner and operator of the Adelaide to Darwin railway, announced today that expressions of interest will be sought from parties in relation to the proposed sale of FreightLink.
In 2001 FreightLink was awarded the concession to build a new railway between Alice Springs and Darwin and to operate the 2,240 km Tarcoola to Darwin railway under a 50 year agreement.
Since commencing operations in January 2004 FreightLink has achieved outstanding growth. It has carried over 2.5 million tonnes of general freight (excluding minerals) on the corridor between Adelaide and Darwin and for the 12 months ending 30 June 2008 will carry close to 800,000 tonnes of general freight. Around 90% of the freight moving between Adelaide and Darwin is now on carried on rail.
FreightLink has secured three major minerals contracts since commencing operations. In April 2006 FreightLink commenced haulage of bulk manganese ore from the OM Holdings Ltd mine at Bootu Creek, 120 km north of Tennant Creek, to Darwin for export. In July 2007 FreightLink commenced the haulage of iron ore for Territory Resources Ltd at Frances Creek in the Northern Territory. FreightLink will begin to carry copper/gold concentrate for Oxiana Ltd from their Prominent Hill mine in South Australia to Darwin when mining operations commence in late 2008.
FreightLink’s CEO, Mr John Fullerton, says that FreightLink has achieved exceptional growth in a very short period and the business is well positioned to further expand its activities in the emerging minerals sector along the Adelaide to Darwin rail corridor.
“The sale of the business which we are announcing today will provide the opportunity for the new owners of FreightLink to capture substantial growth in the future, especially from the haulage of bulk minerals for export and to participate in new rail opportunities across the interstate network” he says.
Mr Fullerton says. “Quality rail assets in Australia are highly regarded for their strategic value and this presents a rare opportunity for investors to acquire a rapidly growing business in the transport and logistics industry where rail will play an increasingly significant role”.
FreightLink has appointed UBS as its Sale Adviser. |
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Shacks
Ghanzel
Joined: Mar 03, 2003
Last Visited: Nov 21, 2008
Location: Sir Big Lens of the Distant (Signal) North.
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Posted: Mon May 19, 2008 1:15 pm
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Hm, this now makes the word that was going around all weekend make some sense. I know of 1 very interested party, but I am not in a posiion to say who it is.
We will just have to wait and see who the new owner is.
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gy
Locomotive Fireman
Joined: Apr 15, 2004
Last Visited: Nov 4, 2008
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Posted: Mon May 19, 2008 2:17 pm
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So long as the new owner is not Asciano (Pacific National) I will be happy because if they get their hands on it the future for the line would be bleak.
PTE.
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Shacks
Ghanzel
Joined: Mar 03, 2003
Last Visited: Nov 21, 2008
Location: Sir Big Lens of the Distant (Signal) North.
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Posted: Mon May 19, 2008 2:32 pm
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Who ever gets the line, the first thing they will have to do is drop the price. More and more containers are heading back to the road every week.
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MD
Assistant Commissioner
Joined: Dec 10, 2003
Last Visited: Nov 16, 2008
Location: Canbera
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Posted: Mon May 19, 2008 2:51 pm
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Im somewhat surprised that no one has commented on why the line is up for sale.
Good article in todays FR.
Essentially the line is making a colossal LOSS.
Why would anyone want to buy it.
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tranzitjim
Chief Commissioner
Joined: Jun 09, 2006
Last Visited: Nov 20, 2008
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Posted: Mon May 19, 2008 2:55 pm
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Perhaps, the federal government could buy the track back?
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drwaddles
In need of a breath mint
Joined: Aug 16, 2006
Last Visited: Nov 21, 2008
Location: Lifting the A-League trophy!
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Posted: Mon May 19, 2008 2:57 pm
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Freightlink haven't exactly been falling over themselves to chase new business - a more enthusiastic operator has potential to turn the finances around, although it would be a long-term investment given the reported number of customers that have gone back to road and (presumably) signed contracts.
People who talk out their asre usually have bad breath.
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VRfan
Moderator
Joined: Jan 13, 2003
Last Visited: Nov 20, 2008
Location: In front of my computer :-p
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Posted: Mon May 19, 2008 3:07 pm
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Well an Asciano would hardly be an "enthusiastic operator" based on their current performance.
IMHO the best scenario would be if the company was split up and the track taken over by ARTC to allow full open access. The operator part could then be sold to whoever and it wouldn't really matter.
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Shacks
Ghanzel
Joined: Mar 03, 2003
Last Visited: Nov 21, 2008
Location: Sir Big Lens of the Distant (Signal) North.
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Posted: Mon May 19, 2008 4:04 pm
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FreightLink are currently making a proffit, the problem is it has taken them alot longer than they said it would and the banks want their money, all of it. So the only choice is to sell it.
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arctic
Junior Train Controller
Joined: Apr 26, 2006
Last Visited: Nov 21, 2008
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Posted: Mon May 19, 2008 4:08 pm
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| MD wrote: | Im somewhat surprised that no one has commented on why the line is up for sale.
Good article in todays FR.
Essentially the line is making a colossal LOSS.
Why would anyone want to buy it. |
I was wondering when you would stick your hand up MD....
Because it makes an *operating* PROFIT thats why. This is money left over after running the trains and maintaining the track, paying overhead etc and is known as EBIT. If EBIT (Earnings Before Interest and Tax) is substantially positive then a viable business is there provided the debt structure and level is right. The loss comes from servicing the debt.
If the EBIT was negative then yep no-one would want it.
If its sold at the right price and interest rate then the operating profit is enuf to cover the interest.
During the sale process the various potential buyers will study the business, look at the EBIT, risk, potential for growth and see how much debt the line can support. That will be their bid.
You might wonder why the FR article you quote notes a source that a possible sale price is 1Bn+. You don't get that kind of dough for an un-viable business, but I guess we will wait and see.
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mjja
Sir Nigel Gresley
Joined: Jan 13, 2003
Last Visited: Nov 17, 2008
Location: Mount Waverley, Melbourne
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Posted: Mon May 19, 2008 11:31 pm
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So is it the operating bit or the track access bit that's up for sale? Or both?
The track access bit should go to ARTC. It's part of the national network, it should never have been privately owned.
The operating bit - obviously QRN and PN will be tendering, but I don't really want either of them to get it. We need more operators in this country, not less. It would be nice to see an FQ leading 2819 and C501 on MB7, but it's more important to have realistic competition.
Happy Gunzelling and remember, "Go by rail!"
Michael Angelico
President, Smart Passengers Inc
(My opinions are my own unless specifically stated.)
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Gwiwer
Rt Hon Gentleman and Ghost of Oliver Bulleid
Joined: Nov 22, 2003
Last Visited: Nov 21, 2008
Location: Far away yet close at hand in images of elsewhere
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Posted: Mon May 19, 2008 11:52 pm
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For my 10 cents (which will not go very far in servicing anyone's debt) the line should be seen as a national asset and as such should, along with most of our interstate strategic lines, become managed by Canberra though not directly operated from there.
This protects the right of way and should guarantee the maintenance while offerring accredited operators the chance to run traffic at what ever rates they feel are commercially viable.
That might for instance give a big player such as QRN an advantage in heavy-haul where they can budget for economies of scale and resource double-stackers on the major traffic flows whilst still leaving room for smaller niche operators to handle specialised or smaller volume loadings (the yellow cake traffic might be an example) at something like an acceptable tariff.
And of course we have the passenger service to accommodate as well. Territorian tourism has boomed since the arrival of the Ghan at Darwin and the sale of the line should not be permitted to impact this operation. Indeed subject to pathing it might even become possible for the occasional charter to run though tickets would not be cheap!
If this opportunity were taken by Canberra as a first step to the Nation taking outright ownership of its key rail links then we might all be able to have a little more long-term faith in the system and perhaps even a period of some stability.
CEO Penhayle Bay Railway. Ferroequinologist. BA Hons (Honourable Bachelor of Aquatarts  )
The wise yet mysterious Sir Gwiwer Greybeard |
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bingley hall
Chief Commissioner
Joined: Nov 09, 2005
Last Visited: Nov 21, 2008
Location: gone fishin
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Posted: Tue May 20, 2008 12:10 am
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| mjja wrote: | So is it the operating bit or the track access bit that's up for sale? Or both?
The track access bit should go to ARTC. It's part of the national network, it should never have been privately owned. |
It's the whole kit and kaboodle up for sale and therein lies the problem.
You have an above rail operation that reportedly makes a modest profit and a below rail operation that continues to bleed, and they are joined at the hip.
The most logical step would be for the infrastructure to revert to some form of government ownership under ARTC control, but given that the combined government investment in the infrastructure has already topped $500m, are they really going to want to shell out big biccies for it?
There is also the question of Tarcoola to Alice. I'm pretty sure that the lease on that does not cover the onward sale to a third party.
All very tricky really 
Bing
Life is just a bowl of All Bran...you wake up every morning and it's there
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BDA
Chief Commissioner
Joined: Oct 17, 2003
Last Visited: Nov 20, 2008
Location: Sydney
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Posted: Tue May 20, 2008 9:32 am
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I agree Bing , separate the above and below rail and reassess the whole issue .
I still can't work out how the competition policy thing didn't get involved in the first place .
Personally I'd like to see ARTC oversee the infrastructure side of things on that line and naturally have open access .
If Freightlink were detached from the infrastructure there may be a glimmer of hope for it though I doubt the Banks give a toss .
No doubt whoever gets the line will have looked long and hard at potential mineral transportation because it could be feast or famine .
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